Motivation Theory Literature Review

Motivation Theory Literature Review INTRODUCTION: Motivation is naturally conceptualized either as an desire arising from within the human being or as an impulse arising from within the organism or as an attraction arising from an object external to the individual. According to Baron (1991) defines motivation as the internal processes that activate, guide, and maintain behaviour especially goal-directed behaviour. Also (Kanfer, 1998) defines as free will element of behaviour and the psychological mechanism governing the direction, intensity, and persistence of action not due solely to individual differences in ability or overwhelming environmental demands that force action. Motivation has been defined as essential to adaptive functioning and quality of life (Marin Chakravorty, 2005), and as the content of the positive thinking one wishes to maintain towards the attainment of an objective (Schweingruber, 2006). According to (kanfer, 1990) states that challenges facing researchers into motivation is that it cannot be seen and most in dividual see is a multidimensional stream of behaviour and the products of those behaviours. Also states motivational processes can be inferred only from analysis of this continuing stream of behaviour that is determined both by environment and heredity and is observed through their effects on personality, belief, knowledge, abilities and skills. Besides that,(Herzberg,1987)describes movement as a function of fear of punishment or failure to get extrinsic rewards and motivation as a function of growth from getting intrinsic rewards out of interesting and challenging work. Motivation is to be intrinsic and extrinsic. Intrinsic motivation is internal. Intrinsic motivation is obvious as the performance of an activity for its inborn satisfaction rather than for some detachable outcome. As soon as, intrinsically motivated, a person is stimulated to take action for the pleasurable or challenge entailed relatively than because of external products, pressures (Ryan et al 2000). It occurs wh en people are compelled to do something out of pleasure, importance, or desire. Extrinsic motivation occurs when external factors compel the person to do something. Extrinsic motivation is a pull together that pertains whenever an action is done in order to reach some detachable result. (Rayan et al. 2000).Motivation is the driving force within individuals that compels them physiologically and psychologically to pursue one or more goals to fulfil their needs or expectations. (Lam Tang, 2003, p. 61) From my understanding whatever the behaviour, the drive pushing or polling person to act in particular way is motivation and most researchers believe motivation as the drive behind human behaviour. Furthermore, people cannot be motivated to do something if there is nothing in it for them. Obviously, reward may be the avoidance of a negative outcome as much as it may be the achievement of a positive outcome. Motivation theory has to do with why do individual make the choices they make? or what makes someone persist at one activity and yet quickly give up another. Motivation is to give reason, incentive, enthusiasm, or interest that causes a specific action or certain behaviour. Motivation is present in every life function. Simple acts such as eating are motivated by hunger. Education is motivated by desire for knowledge. Motivation is a vital quality that pervades all aspects of teaching and learning. Motivated students display interest in activities, motivated teachers feel that they can help students learn and motivated administrators make possible teaching and learning in their buildings. Self-motivation is what most people use to define motivation at its highest mountain of accomplishments. If you are able to motivate yourself and reach your goals, you would have conquered the ability to be disciplined and will accomplish anything you put your mind to. Motivation is very important to all decisions that you have to make. In the workplace, motivation is defined by the actions that employees take to improve the company goals as well as their aspirations for career advancement. The effective performance of employees is what makes or breaks a company. So to keep employees motivated, employers must invest in the overall morale by implementing workshops and seminars to help them. Managers are the key personnel in what makes an employee follow directions. Using rewards like promotions and incentives as well as compliments can greatly improve an employees view of the company and its managers. Employees like to be recognized for their efforts regardless of the salary bracket. Such recognition keeps them motivated in getting their job done. Recognition in this case is the motivation technique that managers can tap into and gain the structure over the workplace environment of how they want things done. What organisation and managers can do is provide the environment, support and resources that will influence and effect motivation. Nowadays, managers are trying to find useful motivation theories to motivate their employees. While there are a wide variety of motivation theories on human motivation discussed in this literature review, which means that managers can use any or all those motivation theories to motivate their employees. Managers can use these motivation theories in ways that complement each other. MOTIVATION THEORY-MAJOR CONCEPTS AND CONTRIBUTIONS This is all about the main researchers of motivation theories and to illustrate how these theories can be apply to practical situation. Also reviewed how the major concepts and contributions can apply in work related situations and applying them in groups, teams at organisational level and individual level. Motivation is a complex concept and there are many different theories which look at the subject from different perspectives. The different theories of motivation and criticisms of the theories have been discussed as follows: 1: Hierarchy of needs theory by Maslow A.H. 2: Hygiene theory by Herzberg F. 3: X and Y theory by McGregor D.M. 4: Existence- Relatedness-Growth theory by Alderfer C. P. 5: Expectancy theory by Vroom V. 6: Goal-Setting Theory by Locke E.A. 7: Internal and External control theory by Rotter J.B. 8: Achievement theory by McClelland and Atkinson J.W. 9: Job characteristics theory by Hackman J.R. and Oldham G.R. HIERARCHY OF NEEDS THEORY: According to Maslow (1954) projected that motivation is based on a number of human need. It has to do with the hierarchy that requires the lower more basic needs to be satisfied before the increasingly less basic ones above. Maslow believed that there are five basic needs of the theory. Maslows Hierarchy of Needs is one of the most famous motivation theories, and it has been the centre of much interest by management researchers (Katz, 2004). This (Fig.1) is Maslows hierarchy of needs in pyramid with physiological needs at the base, self-actualisation at the top. 5: Self- actualisation needs: Refer to personal growth and development. 4: Esteem or Ego needs: Refer to need for status and self respect. 3: Social needs: Refer to need to part of a social group and belongingness/love 2: Safety needs: Refer to security, need for shelter or physical danger. 1: Physiological needs: Refer to basic life needs, like food, drink, shelter, etc THE SELF ACTUALISATION NEED: Maslow defined self-actualization as the complete use and utilization of talents, capacities, potentialities. (Maslow,1954). Self-actualization is not a static state. It is an ongoing procedure in which ones capacities are fully, imaginatively, and cheerfully utilized. Self-actualizing people perceive life without a doubt and they are less emotional and more objective. ESTEEM OR EGO NEEDS: According to Maslow, esteem needs were made of two types of desire. I: Desire for strength, adequacy achievement, competence and confidence in the face of organisation. 2: Desire for reputation, glory dominance, recognition, appreciation and dignity Furthermore, people need to be respected, to have self-esteem, self- respect and respect. Self-Esteem expresses the normal human desire to be acknowledged and valued by others. This has to with ones internal needs for self-respect, autonomy and external needs for status and recognition. SOCIAL NEEDS: Are the third level of human needs from the (Fig 1) above. This has to do with ones needs for affection and a sense of belonging and acceptance. Human being need to feel a sense of belonging and acceptance. They need to love and be loved. According to (Maslow, 1954) include the giving and receiving of affection. SAFETY NEEDS: As soon as peoples physical needs have satisfied, they will chase higher level needs, such as safety needs. Safety needs are determined by the need for security and protection from physical and emotion harm. Safety needs include: personal security, financial security, health and well-being, and a safety net or insurance for accidents/illness and the adverse impacts. PHYSIOLOGICAL NEEDS: Are the lowest level of needs, from the (Fig 1) above which are the most basic needs for people. Physiological needs are also measured the needs for human survival. If these needs are not met, people cannot continue to function. Physiological needs include: breathing, homeostasis, water, sleep, food, excretion, and sex. According to (Sarah Steve 2002, p175)the theory engrossed criticism regarding its principle that individuals work on satisfying needs at a higher level only once all lower- level needs have been met. Also major problem facing the theory is how to measure needs, both in terms of how powerfully they are felt and of how someone knows they have been met. Furthermore, the theory is not easy to apply directly to work because need are not met through one source. HYGIENE THEORY: According to (Herzberg et al 1959) proposed his Two-Factor Theory of Human Motivation, known as Motivation-Hygiene theory. Hygiene theory is based on the principle that things people come across satisfying in their jobs are not always the opposite of things they find dissatisfying. Herzbergs Two-Factor Theory is based on the results of research into the factors in a workplace that lead to employee satisfaction. Herzberg made use of a survey, titled, What do people want from their jobs? to achieve insights into what workplace factors people perceived as satisfying and dissatisfying. He asked people to describe in detail which workplace factors led to satisfaction and which factors led to dissatisfaction, and then he separated the results and classified them.Fig.2and Fig.3 show the factors that led to extreme satisfaction and dissatisfaction, respectively. Fig.2 Shows Factors that led to extreme satisfaction according to Herzberg Fig.3 shows Factors that led to extreme dissatisfaction according to Herzberg According to(Robins 2001) The criticisms facing the theory, is methodology used by Herzberg does not take into account that often, when things are going well, people take the credit themselves, and when things are not , they blame others and their situation. There is on job satisfaction against which the people could rate their job. Also situational factors were not identified. Despite the criticisms the theory is a vital theory of motivation and used by managers to consider hygiene factors with regards to motivation. X and Y THEORY: Based on( McGregor, 1960)reviewed that the relationship between managers and employee could be immensely improved if the assumptions that had develop about how people behaved at work were changed from Theory X view to a Theory Y view. Basically one is positive and the other is negative. THEORY X: was based on scientific management school of thought and projected that enlarged productivity could result from breaking jobs down into small unit of work and giving workers a small range of obviously defined tasks to do. According to (Gray Stark, 1984) Employees do not like to work and want to evade work as much as possible. Employees do not want to take responsibility for the work; managers should take some actions, like convincing and supervising strategies, to help them finishing their mission. Theory X assumed that human actions are dictated by low-level needs, THEORY Y: Was based the predominant theory of management there could be no trust between management and employee. Also Small opportunity for relationship between management and employees in theory .According to (Gray Stark, 1984) employees treat work as entertainment and rest, it is natural. Employees have the ability to make creative decisions, not just managers. Theory Y assumed that human actions are determined by high-level needs. The theory X and Y can influence how motivating factors are regarded within an organisation. Theory X has to do with extrinsic rewards such as pay in order to motivate people to execute good in their job while theory Y has to do with working environment in which employees may discern intrinsic rewards in their job. EXISTENCE RELATEDNESS GROWTH THEORY: This has the similarities to Maslows needs hierarchy. Alderfer C.P. extended and simplified Maslows hierarchy into a shorter set of three needs: Existence, Relatedness and Growth (ERG) Theory. (Alderfer, 1969) EXISTENCE NEEDS: According to (Hollyforde Whiddett 2002) Refers Existence needs as our concern with basic material subsistence motivators and size of how satisfied this need is therefore mostly stated in conditions of what one person has in relation to others. Existence needs, is based on various forms of material and physiological needs. RELATEDNESS NEEDS: Refers to the  motivation we have in support of maintaining interpersonal relationships GROWTH NEEDS: Refers to an intrinsic desire for personal development. Relate to personal creativity and productivity. According to (Sarah Steve 2002), the theory does not suggests how a person may meet his or needs .So managers cannot presume that everyones relationship needs will be met in the same way. Also the theory ERG theory with its three broad categories is maybe easier to deal with than the five levels of need in hierarchy of needs theory. EXPECTANCY THEORY: Vroom suggests that this theory is Based on the principle that people expect particular actions to achieve a desired result and that the desired result is something worth striving for or avoiding. Vroom does not give attention to on needs, but rather focuses on outcomes. According to (Vroom, 1964) identifies two terms the theory. 1. Expectancy: means the stronger the assurance that an act will be followed by particular outcome, the stronger the expectancy is considered to be 2. Valence: Means affective orientations toward particular outcome either positive or negative. Theory expectancy and valence of Vroom concentrated on extrinsic outcomes rather than intrinsic ones. Based on research expectancy and valence are not as distinct from each other as Vroom recommended .And one the key criticisms is that the theory was tested as if it was based on behavioural and attitudinal predictions across rather than within persons. Furthermore, expectancy theory accommodates multiple work outcomes in forecasting motivation and predicts motivation to work hard to earn the merit pay will be low if expectancy low (Schermerhorn J. et al 1997) GOAL-SETTING THEORY: The theory is based on the principle that individuals are motivated to achieve the successful accomplishment of challenging goal. According to (Locke, 1968) based his result on three main conclusions. 1: The more hard goals result in higher level of performance than easy goal 2: The specific goals produce higher levels of performance than general goals. 3: The behavioural intentions influence the choices people make. The Goal -Setting theory is helpful to many managers because much of people management is particularly about performance against goals. Theory has great relevance for managers. According to (Robins, 2001) Implies that Goal Setting theory is restricted to those cultures that match the ones in which the research was carried out. INTERNAL AND EXTERNAL THEORY: The theory is based on locus of control. Locus of Control refers to an individuals perception about the underlying main causes of events in his/her life. According to (Rotter, 1966) invented the internal -external dimension to determine locus of control. Based on the extent to which people feel they are in control of the situations that engulfed them and also the extent to which they are convinced of directing events 1. External control: when individual feels that result of his or her actions is as the result of chance, luck as under the powerful others. 2. Internal control: When individual perceives that the occurrence is contingent upon his own behaviour. The Internal and External theory has been criticised for its centre of attention on the Internal-external dimension only as on personality variable .Besides that the theory is useful when considering motivation issues at individual level. ACHIEVEMENT THEORY: The theory is based the needs that can be classed as either Achievement(nAch), Affiliation(nAff) or Power(nPow) .Also theory is based on three factors research into behaviour in achievement-oriented activities. 1: when individual expects to receive unmistakable feedback on the marks of his or her action. 2: When individual feels liable for the outcome success or failure. 3: When individual feels a little level of uncertainty or risk in the activity Achievement theory does not explore why some people enjoyment a challenge and others fear failure. Achievement theory was not specifically about work. The theory is useful when considering why individuals react different to achieving tough goals and why they react to failure in individual ways (Sarah Steve 2002).McClelland recommends that top managers should have a high need for power coupled with a low need for affiliation. Sunil R. Cited (Kreitner kinicki 1998) JOB CHARACTERISTICS THEORY This theory is based on how to design a job so that it is motivating to individual. Also the theory deals with how individual responds to complex and challenging tasks. According to (Hackman Oldham 1976) job characteristics theory proposed that individuals intrinsic motivation is affected by psychological states: 1: Experienced meaningfulness of the work: The extent individuals perceive the job as meaningful and valuable. 2: Experienced responsibility for the outcomes of the work:-the extent individual feels personally accountable and responsible for the outcome of work done. 3: Knowledge of the result of the activities:-the extent individual knows, and understands on continuous basis how successfully he or she is performing the work Also theory has five job dimensions 1: Skill variety-this has to with number of type of skill and talents of individual. 2: Task identity-this has to with work at hand and job completion 3: task significance- this has to with job considerable impact on lives or work of other people. 4: Autonomy -All about individual in setting up the work and determining the procedures to be used in carrying it out. (Freedom and independence at work environment). 5: Feedback-All about individual getting direct and clear result about the effectiveness of his or her performance The theory is one of the few motivation theories specific to an organisational environment and has plenty of practical application. Theory centre of attention is on facilitating0 high internal work motivation. Hackman and Oldman based their theory on motivating individual through job design. CONTRIBUTIONS: According to (Whittington Evans 2005) The Hierarchy of Needs theory proposed by Maslow has been identified as a major influencing factor in the growth of other motivation and management work, such as that of McGregor (Theory X and Theory Y) and Herzberg Motivation-Hygiene theory. It has been generally applied as a basis for much research into, among other things, workforce commitment, job satisfaction and management theory (Stum, 2001). Goal-Setting Theory by Locke has been acknowledged the best goals and dispute facing management environment and Achievement theory by McClelland has identified problems facing motive to achieve success in management work. (Sarah Steve 2002).Expectancy theory has been used to identify job satisfaction, occupational choice, the likelihood of staying in a job, and the effort that one might expand at management work. Internal and External control theory by Rotter has enhanced the concept of persistence (locus of control) in management work. The job char acteristics theory relies on workers insight of the job dimensions for the accomplishment of the psychological states that lead to increased motivation. APPLICATION OF THE CONCEPT OF MOTIVATION TO FACILITIES MANAGEMENT Facilities management regularly deals with identifying relations that humans have with their environment. According to (Smith et al., 1997) the rates of pay had very little influence on participants job satisfaction and subsequent work motivation. Some affiliation can be made at this point to Maslows lowest levels of his hierarchy of needs physiological and safety needs. Maslow argued that individuals can only move up the hierarchy of needs to the higher levels of belongingness/love, esteem and finally self-actualisation, once the lower levels had been achieved; however, the results demonstrated in this study suggest that ancillary staff can be motivated and achieve higher levels of Maslows hierarchy without having their physiological and safety needs completely fulfilled. Individuals can only move up the hierarchy of needs to the higher levels of belongingness/love, esteem and finally self-actualisation, once the lower levels had been achieved; on the other hand, the results demons trated in this study suggest that facilities managers can motivate their staff and achieve higher levels of Maslows hierarchy without having their physiological and safety needs completely fulfilled. McGregors Theory X and y focused on managements assumptions about employees. Theory X and Y describe the average worker from management perspective and suggest methods by which facilities manager can get the best out of worker. Herzberg studies concentrated on satisfaction at work. Herzberg came to a conclusion that certain factors tended to lead to job satisfaction.(motivators),while others led to frequently to dissatisfaction(Hygiene factors).these factor are related to job context they are concerned with job environment as an extrinsic to the job itself. Shane, S., 2001. Technology opportunities and new firm creation. Management Science 47 9, pp. 1173-1181. LATEST IDEAS ON MOTIVATION THEORY First of all, fields of management background study like leadership, decision making and organization plan persist to develop conceptually speculative developments focusing on work motivation have not held in reserve speed. These changes can have a philosophical manipulate on how companies challenge to attract, retain and motivate their employees in labour market. JOB DESIGN: This is about changing the content or process of job to increase job satisfaction and performance. This is usually easier for new organisational or new business unit. Furthermore, most organisations find themselves designing as the result of organisational change and to motivate their Staff. Job design is relating to job characteristics theory, suggests job should be design in such a way as to maximise intrinsic motivation. (Sarah Steve 2002) EFFECTIVE COMMUNICATION: This gives managers strategies, to promotes positive improvement in organizations particularly motivation and performance improvement o f employees. For organization to improve well, messages should be designed in such a way as to maximise motivation. Effective communication strategies have strong effect to motivation of employees. (Sarah Steve 2002) OBJECTIVCE- SETTING: This is important to managers to focus individuals work efforts. It is important to commit employee with goals to motivate them. Most organisations applied Management by Objective (MBO) to motivate their employee. This is relating to Goal-setting, suggests individuals tend to produce higher levels of performance when they have specific goal. (Sarah Steve 2002) MANAGING VIRTUAL TEAMS: Is made of group people who regularly work mutually dependent for joint purpose across time, distance and organization. So motivating people to apply for jobs in virtual teams is one of the latest ideas. CONCULSIONS Motivational techniques, therefore, are useful to teachers, leaders, parents, employers, and almost anyone. The key is in understanding that you are not motivating someone else. Instead, you are simply providing a circumstance that triggers that person to be motivated. However, The developments in motivation and management theory. (Whittington Evans 2005) conclude that the road to building high commitment organisations requires the solid foundation laid by Maslow, McGregor and Herzberg. Motivation theories can therefore offer guidance to anyone interest in motivational issues. Motivation theories discussed above can help mangers consider how and why people are motivated. For example, Hierarchy of need theory may help manager figures out where someone is in term of the satisfaction his or her short and long term needs -which may in turn influence how they seek to create the situation that may be the most motivating. Motivation theories discussed were based on work related environment s. However the can be applied to help individuals understand human behaviour at work. This literature review also emphasized the important of motivation theories to facilities manager with regards to working environments. Also provide frameworks enable facilities manager to manage their working environment. Finally, one of the challenge facing researchers into motivation, it cannot be seen.

Business Association Outline

I. Agency (Chapter 1) A. Who is an Agent i. Agency Definition Agency is a fiduciary relationship which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control and consent by the other to so act. 1. Contractual relationship is not necessary, nor do either need to receive compensation 2. Agent – the one to act 3. Principal – the one for whom action is taken 4. Agency means more than mere passive permission; it involves request, instruction, or command 5.Agency cannot exist when it is against public policy or illegal 6. Agency is like an enforceable contract (offer + acceptance) but does not require consideration 7. 3 Different forms of agency: (1) Principal-Agent; (2) Master-Servant; (3) Employee-Employer or independent contractor 8. Principal cannot delegate a non-delegable act ii. Allocation of risk and responsibility based on principals of agency 1. A way to get someone to act on behalf of ano ther 2.Agency allows things to get done in a way that otherwise is not possible 3. Agents are force multipliers which allows a concentration of resources behind a collective purpose Principal-Agent-Third Party (PAT) Triangle 1. Principal is typically the lowest cost avoider and in the best position to mitigate damages 2. Agent – one authorized to act for another 3. Third Party – what does this party â€Å"see†? would a reasonable person believe that the agent had authority to bind the principal Gorton v. DotyFacts: Gorton injured in an automobile accident after Doty loaned her vehicle to coach to transport Gorton and others to football game ROL: An agency relationship results from one person's consent that another will act on his behalf and subject to his control and the other person's consent so to act Gay Jenson Farms Co. v. Cargill, Inc Facts: Plaintiffs entered into grain contracts with Warren Grain & Seed Co. , which was financed and controlled by Cargill, Inc. , a separate entity ROL: A creditor who assumes control of his debtor's business may become liable as principal for the acts of the debtor in connection with the business 1.One who contracts to acquire property from a third person and convey it to another is the agent of the other only if it is agreed that he is to act primarily for the benefit of the other and not for himself 3 Factors indicating that one is a supplier, rather than an agent: (1) that he is to received a fixed price for the property irrespective of the price paid by him – most important factor; (2) that acts in his own name and receives the title to the property, which he is to transfer; (3) that he has an independent business in buying and selling similar property Existence of agency may be proved by circumstantial evidence which shows a course of dealings between two parties Criticism and recommendations could be viewed as control B. Liability of Principal to Third Parties in Contract 1. Actual Authori ty (Express & Implied) Actual Authority: Agent must believe there is authority to act for the principal, must look through the eyes of the agent using reasonable person (RPP) standard Express Authority Express Authority: affirmative statement of authority to act, given either orally or in writing.Principal can mistakenly grant express, actual authority, but authority must be given either orally or in writing Implied Authority implied authority: is actual authority circumstantially proven which the principal actually intended the agent to posses and includes such powers as are practically necessary to carry out the duties actually delegated. Look through the agent's eyes- does the agent reasonably believe she is acting within the scope of the authority 3 ways implied actual authority can arise 1. Incidental – absent a clear, contrary instruction by the principal, the agent can use all reasonable means necessary to carry out the goals of the agency 2.Custom – if it is cu stomary in an industry for an agent to have certain authority, but the agent cannot unilaterally expand the agent's authority 3. Pattern of conduct between principal and agent- if principal fails to object to known actions of agent Mill Street Church of Christ v. Hogan Facts: Hogan was injured after he was hired by church employee to paint the inside of the church ROL: Actual authority exits until it is revokes, i. e. must be communicated. Implied authority is actual authority that is proven circumstantially to indicate that the principal intended to delegate powers to the agent that are necessary for carrying out the agent’s duties, and one major circumstantial factor is prior work performed by agent for principal. 2. Apparent AuthorityApparent authority is authority the agent is held out by the principal as possessing. It is a matter of appearances on which a third party comes to rely Person alleging agency and resulting authority has the burden of proving that it exist bas ed on the totality of the circumstances (TOC) a mere statement cannot prove agency, but it can be established by circumstantial evidence including the acts and conduct of the parties such as the continuous course of conduct of the parties covering a number of successive transactions 3 Ways to Create Apparent Authority 1. Direct communication (or conduct) by the principal to the 3rd party that the agent has actual authority, even though the agent does not. 2.Inaction by the Principal: principal must deny the authority, when he does not, then apparent authority is created 3. custom: certain positions involve generally recognized duties that include certain authority. Two ways to create: (1) 3rd par has to know that the principal placed the agent in a particular position; or (2) must be customary for an agent in that position to enter into the type of agreement in question. Three-Seventy Leasing Corporation v. Ampex Corporation Facts: 370 Leasing executed a document provided by an Ampe x Corp representative for the purchase of computer leasing equipment, but Ampex never executed the document ROL: an agent has apparent authority to bind the principal when the principal acts in such a manner as would lead a easonably prudent person to suppose the agent had the authority he purports to exercise Absent knowledge on the part of the 3rd parties to the contrary, an agent has apparent authority to do those things, which are usual and proper (custom) to the conduct of the business that he is employed to conduct Principal can protect itself from agents action by hiring well, training agents, communicating to known 3rd parties, giving accurate titles to agents 3. Inherent Authority Inherent Authority: power of agent which is not derived from authority (actual or apparent), but solely from the agency relation and exists for the protection of persons harmed by or dealing with a servant or other agent PAT Triangle 1. Looking through the eyes of the agent – agent did not have actual authority. Agent holding out not required. 2. Looking through the eyes of the 3rd party – the 3rd party did not know the agent was working for the principal; therefore, no apparent authority 3. rd party can avoid the situation, although economically inefficient, the principal is in a better position to avoid the appearance of authority Holding out: where the principal holds out the agent to the public as one having authority to act for the principal. 3rd party must have knowledge of both the principal, the agent, and the P-A relationship in order to have a holding out. Inherent authority is about economic efficiency- who should bear the loss? the lowest cost avoider; the party who could have most beared the cost. an undisclosed principal is subject to liability to a 3rd party who is justifiably induced to make a detrimental change in position by an agent on the principal's behalf without actual authority Watteau v. Fenwick Facts: Humble operated Fenwick's tavern u nder Humble's name and credit.Humble purchased goods from Watteau without Fenwick's express authority ROL: When a principal is undisclosed to 3rd parties, the actions taken by an agent in furtherance of the principal's usual and ordinary business binds the principal. Risk of loss in on the principal Restatements a. becomes the enunciation of the rules and if adopted by statues, they form a standardized or form contract and applies by operation of law; rules and the parties can modify rule through own agreements b. 3 Transactional costs: (1) the cost to â€Å"get the job done,† what does it cost to complete the entire transaction; (2) the cost above and beyond the services/goods one is seeking; (3) the restatements provide certainty and uncertainty results in severe transactional cost c. principals of economic maximization – get the most out of it Agency a. most common business association is agency b. person includes natural persons, but also includes legal persons suc h as corporations, partnerships, non-natural people, NGO, legal personage c. An agent's consent can be inferred from conduct d. Burden of proof (by mere preponderance of the evidence) falls on the party claiming that an agency relationship exists. (i) consideration is not needed; (ii) does not need to be formal or in writing, can be established through conduct; (iii) legal capacity is not necessary to form an agency relationship; i. e. , minor, as an agent, can enter into a contract on the principals behalf to bind the principal e. an agency relationship can exist even where the parties did not want, nor intend, that such a relationship to exist f.On behalf of the principal (i) agent must act primarily for the benefit of the principal; (ii) must be the expectation that the acts of the agent are on behalf of the principal; (iii) must be the expectation that the acts of the agent are on behalf of the principal; (iv) Can have an agency even where the agent is not producing a benefit fo r the principal–no particular result is required g. Control: if the principal specifies the task the agent performs that is sufficient for control to be present; very little control is needed. C. Liability of Principal to Third Parties in Tort 1. Servant Versus Independent Contractor ROL: A master is liable for the torts of its servants under the doctrine of respondent superior. A master servant relationship exists when the servant has agreed to work on behalf of the mater and subject to the master's control or right to control the physical conduct of the servant 3 Important actors of business relationships: (1) duration; (2) control (more control–less liability protection); (3) risk of loss and return (existence of independent contract reduces risk) The test of an independent contractor applies to whether the company has retained the right to control the day to day operations of the service station: control or influence over results alone being viewed as insufficient Humble Oil & Refining Co. v. Martin Facts: Martin was injured by a vehicle that rolled away from the service station owned by Humble Oil & Refining Co, but operated by another under contract ROL: Determining whether a master-servant relationship exists, rather than an independent contractor relationship, is a question of fact that will be answered in the affirmative when the master exerts a considerable amount of control over the responsibilities of the servant Hoover v. Sun Oil Company Facts: Hoover was injured when his car caught fire while a service station employee was fueling it.ROL: A master-servant relationship does not exist when an independent contractor controls the day-to-day operations of the entity that is responsible for damages suffered by a plaintiff. Restatement of Law (Second) Agency  § 220, Definition of Servant The principal is only liable for the actions of servant/employee Before assigning liability to the master must determine if the servants conduct is with in the employment scope. In determining whether one acting for another is servant or independent contract, the following 10 matters of fact, among others are considered: 1. the extent of control which, by agreement, the master may exercise over the details of the work 2. whether or not the one employed is engaged in a distinct occupation or business 3. he kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the employer or by a specialist without supervision 4. the skill required in the particular occupation 5. whether the employer or the workman supplies the instrumentalities, tools, and the place of work for the person doing the work 6. the length of time for which the person is employed 7. the method of payment, whether by time or by job 8. whether or not the work is part of the regular business of the employer 9. whether or not the parties believe they are creating the relation of master and servant 10. whether the princ ipal is or is not a business 2. Scope of Employment servant's acts may be within the scope of employment although consciously criminal or tortious, but serious crimes are outside the scope. a servant's use of force against another is within the scope of employment if the use of force is not unexpected by the master such as a bouncer a single comment by a customer does not justify imposition of liability on the employer Manning v. Grimsley Facts: Grimsley threw a baseball at Manning in response to Manning's heckling at a baseball game ROL: to recover damages from an employer for injuries from an employee's assault, the plaintiff must establish that the assault was in response to the plaintiff's conduct that was presently interfering with the employee's ability to perform his duties successfully.Presently interfering test: the interference may be in the form of an affirmative attempt to prevent an employee from carrying out his assignments D. Fiduciary Obligation of Agents (Duties Dur ing Agency) Under an agent's fiduciary duty to the principal, the agent is bound to the exercise of the utmost good faith and loyalty so that the agent did not act adversely to the interests of the principal by serving or acquiring any private interest of the agent or a third party from which the agent gets a benefit, i. e. , kickback Agent is bound to act for the furtherance and advancement of the interest of the principal General Automotive Manufacturing v. Singer Facts: Singer while employed by General Automotive Mfg, Co. secretly concealed profits earned by accepting personal orders from the plaintiff's customers ROL: An employee will be held to his or her contractual duty of loyalty, and their fiduciary duty would forbid them from engaging in activities that are competitive with their employer. Agent is only entitle to received what the agent agreed to receive from the principal, secret profits are illegal If the principal knows and acquiesces to the agent's act of acquiring an d furthering private interests of the agent that are similar to or the same as the principal's interests, then the agent will not be found to have breached the agent's fiduciary duty to the principal II. Partnerships (Chapter 2) A. What is a partnership? And Who are Partners? 1. Partners compared with EmployeesPartnership is an association of two or more persons to carry on as co-owners of a business for profit Burden to establish partnership is upon the one upon who alleges the partnership exists Totality of the Circumstances To Establish a Partnerships Court Looks at 8 Elements: 1. intention of the parties, agreement is evidential, but not conclusive 2. Right to share profits, evidential, but not conclusive. Strongly indicative of a partnership. No inference of partnership shall be inferred where received in payment as wages of an employee 3. obligation to share in losses 4. ownership and control of the partnership property and business 5. Community of power in administration â₠¬â€œ Control is strongly indicative of a partnership 6. Language in the agreement, either including or excluding one from the benefits or obligations of the partnership 7.Conduct of the parties toward the third person 8. Rights of the parties on dissolution Fenwick v. Unemployment Compensation Commission Facts: Cheshire and Fenwick entered into a partnership agreement regarding salon, pursuant to which Fenwick contributed all capital investment, possessed exclusive control over the management of the business, and bore the risk of all business losses. ROL: the sharing of profits does not alone create a partnership, despite the parties’ intentions 2. Partners versus Contract Southex Exhibitions, Inc. v. Rhode Island Builders Assoc. , Inc. Facts: Rhode Island Builders replaced Southex Exhibitions as the promoter of its home how after termination a contract it had entered into with the plaintiff's predecessor ROL: Profit sharing alone insufficient to establish a partnership, rath er the court must assess the totality of the circumstances–mutual control, contributions of valuable property by both parties, shared profits B. The Fiduciary Obligations of Partners Meinhard v. Salomon Facts: Salmon terminated a lease belonging to his joint venture with Meinhard to enter into a new lease on behalf of his solely owned business. ROL: partners owe one another (1) the highest fiduciary duty of loyalty while the enterprise is ongoing, including as well (2) the duty of good faith and (3) duty to disclose. this ROL lowers transaction costs A trustee is held to something stricter than the morals of the market place- at a minimum there must be disclosure Meehan v. Shaughnessy Facts: Plaintiffs, James Meehan and Leo Boyle, left the law firm of the Defendants, Maurice Shaughnessy et al. Plaintiffs wanted money they believed was owed to them under their partnership agreement, and Defendants countered that Plaintiffs violated their fiduciary duty and interfered with Defe ndants’ business ROL: a partner has an obligation to provide true and full information of all things affecting the partnership to any partner ROL: Partners owe each other a fiduciary duty of â€Å"the utmost good faith and loyalty. As a fiduciary, a partner must consider his or her partner's welfare, and refrain from acting for purely private gain-the partners cannot improperly lure away clients from the partnership ROL: fiduciaries may plan to compete with the entity to which they owe allegiance, provided that in the course of such arrangements they do not otherwise act in violation of their fiduciary duty Constructive trust – created by operation of law as a result of breach of a fiduciary duty by a partner, what money the partner received by the bad acts is held in â€Å"trust† for the partnership Fiduciary duties can be varied by the parties by contract Lawyers Departing from a partnership may (1) take steps to locate office space, secure financing, and alt ernative affiliations; (2) inform clients about departure from the partnership and the new practice but cannot solicity clients; (3) lawyer can remind client to retain counsel of the client's choice; (4) refrain from competing before disassociation 603(b)(3) 403(c)(2) 404(b)(3) 603(b)(2) C. The Rights of Partners in Management 1. All partners are jointly and severally liable for the acts and obligations of the partnership. 2.Creditors can collect full amount of judgment against any individual partner. However if one partner pays more than his fair share, the partner can seek contribution from the other partners National Biscuit Company v. Stroud Facts: Freeman purchased bread from National Biscuit Co. , although his partner, Stroud, had informed Freeman and the plaintiff that he would not longer be responsible for additional bread purchases ROL: the acts of a partner, if performed on behalf of the partnership and within the scope of its business, are binding upon all co-partners ROL : every partner is an agent for the partnership with actual authority by the agent to bind the principal, i. e. the partnership.A partner cannot restrict the power and authority of a partner from pursing a going concern for the partnership, if such purchases are an ordinary matter connected with the partnership business unless there is a majority consent by the partners-50% is not enough In the absence of a partnership agreement, partners will have an equal vote in the management of the partnership Difficult for partnerships to remove apparent authority because it is hard to find all creditors to put them on notice that a partner does not have the authority to bind the partnership D. Partnership Dissolution – The Right to Dissolve Owen v. Cohen Facts: Respondent Russ Owen and Appellant Israel Cohen entered a partnership agreement to run a bowling alley. Within a few months Respondent moved for a dissolution of the business once the partners’ relationship turned sour. R OL: Courts of equity may order the dissolution of partnership where the quarrels and disagreements are of such a nature and to such an extent that all confidence and cooperation between the parties has been destroyed or if a partner's misbehavior materially hinders the proper conduct of the partnership's business. E. Limited PartnershipLimited Partnership – a voluntary agreement entered into by two or more parties where one or more general partners are responsible for the enterprise's liabilities and management and the other partners are only liable to the extent of their investments General Partnership – a voluntary agreement entered into by two or more parties to engage in business whereby each of the parties share in any profits and losses equally and each participates equally in the management of the enterprise A limited partner shall not become liable as a general partner unless in addition to the exercise of his rights and powers as a limited partner, he takes co ntrol of the business. Limited partner – investment is passive General Partner – directing management and control of firm If a limited partner takes part in the control of the business and is not a general partner, the limited partner is only liable to persons who transact business with the limited partnership and who reasonably believed based on their conduct, that the limited partner is a general partner. Holzman v. DeEscamilla Facts: The appointed trustee of a bankrupt estate, Plaintiff Lawrence Holzman, brought this action to hold Defendants, Ricardo de Escamilla et al. liable as general partners of the business at issue ROL: if a limited partner exercises control over the business he becomes a general partner and loses any limited partnership protection III. Corporations (Chapter 3) A. The Nature of the Corporation a. Shareholders are the owners of the corporations with 2 fundamental rights: (1) residual value of the firm and (2) elect the member of the board of d irectors b. Directors are (1) elected by shareholders based on the shareholders percentage of ownership (proportional); (2) have a fiduciary duty to manage the firm on behalf of the shareholders; and (3) may have a responsibility to 3rd party by statute c.Officers (CEO, CFO, CO, etc. ) are (1) hired by the board of directors for day to day operations; (2) responsible to the BOD for day to day operations for the benefit of the shareholders; and (3) the certificates of incorporation or bylaws will define which roles are officer positions d. Promoters: (1) people who are doing the work to create the corporation; (2) before certificate of incorporation creates shareholders, directors, and officers; and (3) can become a shareholder, director, or officer e. 3rd Parties: something impacted by the corporations including customers, suppliers, vendors, government, environment B. Promoters and the Corporate EntityCorporation: A distinct legal entity characterized by continuous existence; free alienability of interests held therein; centralized management; and limited liability on the part of the shareholders of the corporation Southern-Gulf Marine Co. No. 9, Inc. v. Camcraft, Inc. Facts: Plaintiff, Southern-Gulf Marine Co. No. 9, Inc. , contracted with Defendant, Camcraft, Inc. , to buy a supply vessel from Defendant. Defendant refused to comply with the agreement, arguing that the contract was invalid because Plaintiff was not incorporated in Texas as the initial agreement stated. ROL: where a party has contracted with what he acknowledges to be a corporation, he is estopped from denying the existence or the legal validity of such a corporation C. The Corporate Entity and Limited Liability Corporate veilCorporate veil – refers to the shielding from personal liability of a corporations officers, directors, or shareholders for unlawful conduct engaged in by the corporation when corporate formalities are respected, the corporate veil will be left intact courts will disregard the corporate veil whenever necessary to prevent fraud or to achieve equity Corporate veil makes risk finite in terms of liability to that which is invested to encourage investors to invest in those with managerial skills and contribution of capital into the business The combination of capital and managerial expertise is key to effective business operation Piercing the corporate veil is an act of equity Walkovszky v. Carlton Facts: A pedestrian struck by a taxicab sued the corporation in whose name the taxi was registered, the cabdriver, nine corporations in whose names other taxicabs were registered, two additional corporations, and three individuals. ROL: An individual can be held liable for the acts of a corporation through the doctrine of respondeat superior if it can be shown that the individual used his control of the corporation for personal gain. a. pon the principal of respondeat superior, the liability extends to negligent acts as well as commercial dealings b. h owever, where a corporation is a fragment of a larger corporation combine which actually conducts the business, a court will not pierce the corporate veil to hold individual shareholders liable Under capitalization is a value judgment Sea-Land Services, Inc. v. Pepper Source Facts: Plaintiff corporation, Sea-Land Services, Inc. , delivered a shipment of peppers for Defendant, Pepper Source, but was never paid and Pepper Source was dissolved before judgment could be enforced against it. Plaintiff wanted to hold Pepper Source and the other Defendants, Gerald Marchese and other corporations he controlled, liable.ROL: Van Dorn Test: In order to pierce the corporate veil and impose individual liability, a creditor must show (1) that there was such a unity of interest between the individual and the corporate entity that separate identities no longer existed, and (2) that a failure to do so would promote â€Å"injustice† or sanction a fraud in some way beyond simply leaving a credit or unable to satisfy its judgment 4 Factors in evaluating the unity of interest: (1) failure to maintain adequate corporate records or comply with corporate formalities; (2) commingling of funds or assets; (3) undercapitalization; (3) one corporation treating the assets of another corporation as its own Possible for one corporation to be liable for the acts of another through a piercing of the corporate veil, in this case there was a reverse piercing, must initially pierce the corporate veil to get to the other corporation. Reverse piercing puts Sea-Land into the position of a debtor instead of shareholder and would have a higher priority to receive funds Commingling assets- combining of money or property into a joint account or asset An unpaid judgment is insufficient to pierce a corporate veil- must examine to see if he shareholder treated the corporation as something different Fulfilling corporate niceties are a transactional cost to the business Frigidaire Sales Corporation v. U nion Properties, Inc. Facts: Frigidaire Sales Corp, a creditor of Commercial Investors, a limited partnership, brought an action against the corporate general partner and its limited partners individually when the partnership failed to pay installments due on contract ROL: Limited partners are not liable for the debts of a limited partnership simple by their status as officers, directors, or stockholders of the corporate general partner as long as they conscientiously keep the corporate matters General partners are liable for the debts of limited partners Officers generally not liable for corporate debts Shareholders (owners of the company) rights: (1) money-residual value of the firm, usually by way of dividends or through appreciation of price stock trades. P/E Ratio where P is market price and E is earnings, divide profits by shares outstanding, 12 P/E means 2 years to get your money back; and (2) vote-for directors of the corporation D. Shareholder Derivative Actions Shareholder derivative lawsuit: lawsuit brought by shareholders on behalf of the organization to compel the organization to take certain action Why? because shareholders feel the corporation is not protecting shareholder interest. The shareholder steps into the shoes of the corporation When? ypically found where officers have some relationship with third party or the third party is the corporate officers Precondition of a derivative lawsuit: shareholder must demand corporation to act before suing. Some jurisdictions excuse the demand requirement where the demand would be futile (i. e. asking the director to sue self) Applies when? the corporation has suffered a loss. Distinguished from direct shareholder loss Institutional investor- people who have significant investments in a corporation Cohen v. Beneficial Industrial Loan Corp. Facts: Plaintiff brought a stockholder’s derivative action in federal court. Defendant, Beneficial Industrial Loan Corporation, argued that a New Jersey tate l aw requiring parties to secure a bond for payment of the opposing party’s legal fees should be followed ROL: A shareholder’s derivative suit will follow state non-procedural laws regarding the derivative suits when possible. E. The Role and Purposes of Corporations A. P. Smith Mfg. Co. v. Barlow Facts: Diversity lawsuit. Defendant stockholders, Ruth Barlow et al. , questioned the legality of a charitable donation to Princeton University made by Plaintiff corporation, A. P. Smith Manufacturing Company. ROL: State legislation adopted in the public interest can be constitutionally applied to preexisting corporations under the reserved power. Corporate gift-giving is an allowable method of increasing goodwill. nder Erie doctrine, state rules apply for substantive issues whereas, federal rules apply for procedural issues Business Judgment Rule (BJR) Doctrine that relieves corporate directors and/or officers from liability for decisions honestly and rationally made in the co rporations best interest BJR: In the absence of fraud, illegality, or conflict of interest, the court will not substitute its judgment for the judgment of the corporate managers Why? (1) there are identifiable transactional costs for hesitating; (2) designed to accommodate the appropriate level of risk, which is better for the economy as a whole Dodge v. Ford Motor Co. Facts: Plaintiff shareholders, Dodge et al. brought an action against Defendant corporation, Ford Motor Company, to force Defendant to pay a more substantial dividend, and to change questionable business decisions (expand factory capability by adding steel plant & use profits to lower price of its cars) by Defendant. ROL: The purpose of a corporation is to make a profit for the shareholders, but a court will not interfere with decisions that come under the business judgment of directors. Although a corporation's directors have discretion in the means they choose to make products and earn a profit, the directors may no t reduce profits or withhold dividends from the corporation's shareholders in order to benefit the public. IV. The Duties of Officers, Directors, and Other Insiders (Chapter 5) A. The Obligations of Control: Duty of CareFiduciary Duty: a legal obligation to act for the benefit of another, including subordinating one's personal interests to that of the other person Business Corporation law: permits actions against directors for failure to perform duties in managing corporate assets option: the right to buy X shares at Y price for Z amount of time Kamin v. American Express Company Facts: Stockholders brought a derivative action, asking for a declaration that certain dividend in kind was a waste of corporate assets ROL: Whether or not a dividend is to be declared or a distribution made is exclusively a matter of business judgment for the board of directors, and the courts will not interfere as long as the decision is made in good faith.ROL: A complaint alleging some course of action ot her than that taken by the board would not have been more advantageous does not give rise to a cause of action for damages Errors in judgment are not sufficient grounds for equity interference for the powers of the entrusted with corporate management are largely discretionary-courts will not interfere with such discretion unless it first appears that the directors are acting in bad faith or for a dishonest purpose Smith v. Van Gorkam Facts: Plaintiffs, Alden Smith and John Gosselin, brought a class action suit against Defendant corporation, Trans Union, and its directors, after the Board approved a merger proposal based solely on the representations of the CEO of Trans Union, fellow Defendant Jerome Van Gorkom.ROL: The business judgment rule presumes that, when making business decisions, directors act on an informed basis, in good faith, and in the company's best interest ROL: the business judgment rule shields directors or officers of a corporation from liability only if, in reachi ng a business decision, the directors acted on an informed basis, availing themselves of all material information reasonably available. 1. Director may only rely on credible information provided by competent individuals, after taking reasonable measure to substantiate it 2. Directors have a duty to be informed to go about their responsibilities in a deliberate manner – hire outside experts (attorneys and investment bankers) 3. Gross negligence is the standard Directors are fully protected in relying in good faith on reports made by officers.The term â€Å"report† has been liberally construed to include reports of informal personal investigations of corporate officers There is no protection for directors who made unintelligent or unadvised judgment Valuing the Business Intrinsic value – what the company is really worth – no one knows what this is 3 Value indicators of a business: (1) cash flow; (2) asset value; (3) share price Discounted Present Value (DPV ) – what is the present value of the income stream. What would you pay to get X dollars tomorrow – a dollar today is worth more than a dollar tomorrow because of inflation. DPV is just one value indicator of a company's value Leveraged BuyoutLeverage Buyout – purchase of a company financed by a relatively small amount of equity and a large amount of debt. Management Leveraged Buyout (MLBO) – inherent conflict in that the management would be making money. (1) Sellers are the shareholders and they want to get the highest price possible, represented by the BOD; (2) Buyers want to pay as little as possible, in a MLBO, the BOD are the one's buying the firm. In a MLBO, the directors are on both sides of the bidding table; therefore we need to have a disinterested director or 3rd party value the firm BJR 1. If the BJR applies, then the analysis ends, no further inquiry needed 2. If BJR does not apply, then look to see if there is a breach of duty 3.A combination of fiduciary duties of care and loyalty give rise to the requirement that a director discloses to the shareholder all material facts bearing upon a merger vote 4. Five Factors to consider in the fairness of the transactions: (1) timing; (2) initiation; (3) negotiation; (4) structure of the transaction; (5) disclosure to and by the directors and shareholders Francis v. United States Facts: Plaintiffs, the trustees in bankruptcy of Pritchard & Baird Intermediaries Corporation (†P&B†), filed suit against Defendant, the executrix of the estate of Lillian Pritchard, for a breach of fiduciary duty as a director of P&B. Lillian Pritchard did not exercise ordinary care n monitoring the finances of P&B when her sons, other members of P&B management, misappropriated funds ROL: Directors have the duty to act honestly and in good faith and with the same degree of diligence, care and skills that a reasonably prudent person would use in similar circumstances ROL: Liability of a corpo rations directors to its clients requires the following to be demonstrated: (1) a duty existed; (2) the directors breached that duty; (3) the breach was a proximate cause of the client's loss ROL: A director's general obligation make it incumbent upon directors to discharge their duties in good faith and with that degree of diligence, care, and skill which ordinarily prudent men would exercise under similar circumstances in like positions. The general rule is that Directors are not personally liable for the debts of the corporation ROL: a director should acquire at least a rudimentary understanding of the business of the corporation . 1) a director should become familiar with the fundamentals of the business in which the corporation is engaged. (2) Because directors are bound to exercise ordinary care, they cannot set up as a defense lack of knowledge needed to exercise the requisite degree of care ROL: Directors are under a continuing obligation to keep informed about the activitie s of the corporation and cannot rely on reports/information by officers if the director knows or should have known that such information is not reliable ROL: Usually a director can absolve himself of liability by informing other directors of the impropriety and voting for a proper course of action. 1) Conversely, a director who votes for or concurs in certain actions may be liable to the corporation for the benefit of its creditors or shareholders, to the extent of any injuries suffered by such persons, respectively, as a result of such action. (2) A director who is present at a board meeting is presumed to concur in a corporate action taken at the meeting unless his dissent is entered in the minutes of the meeting or filed promptly after adjournment ROL: if the business judgment rule does not apply, determine if the decision of the director was a breach of fiduciary duty and establish if it was the proximate cause of the damages B. Duty of Loyalty Bayer v. Beran Facts: Plaintiffs, Bayer et al. filed a derivative shareholder action against Defendant directors, Beran et al. , contesting their decision to pay for radio advertising that employed a director’s wife. Plaintiffs also argued that Defendants needlessly renew the employment contract of Dr. Henri Dreyfus. ROL: A director does not breach his fiduciary duty by approving a radio advertising program in which the wife of the corporate president, who is also a member of the BOD, was one of the featured performers ROL: A director has a fiduciary duty to support the corporation’s interest over his or her own conflicting interests, and any competing interests renders the business judgment rule inapplicable. i. f the BJR does not apply, the directors have the burden of proof, to prevent a conflict of interest, demonstrating they dealt at an arm's length with the specific transaction ii. if a disinterested majority of directors have ratified a contract and if the complaining party could not prove it u nfair, the courts generally hold the contract valid C. Corporate Opportunities Broz v. Cellular Information Systems, Inc. Facts: Defendant, Robert Broz, was the sole stockholder of RFB Cellular, Inc. (†RFBC†) while also acting as an outside director for Plaintiff Cellular Information Systems, Inc. (†CIS†). Plaintiff brought an action against Defendant when Defendant purchased a cellular license for RFBC over a bid by CIS.ROL : The corporate opportunity doctrine holds that an officer or director of a corporation can take a corporate opportunity (1) if the opportunity is presented to them in their individual capacity; (2) the opportunity is nonessential to the corporation; (3) the corporation has no expectation for the opportunity; (4) and they have not wrongfully utilized corporate resources to take advantage of the opportunity. HC ROL: Under the doctrine of corporate opportunity, a corporate fiduciary must place the corporation's interest before his own inter ests in appropriate circumstance, but a corporate fiduciary does not breach his or her duty by not considering the interests of another corporation proposing to acquire the corporation in deciding to make a corporate purchase.Usurpation of Corporate opportunity factors: (1) corporation is financially able to take advantage of the opportunity; (2) the opportunity is in the corporate line of business; (3) corporation has an expectancy interest; and (4) accepting the opportunity would create a conflict of interest In Re eBay, Inc. Shareholders Litigation Facts: Shareholders of eBay brought derivative action against certain eBay officers and directors for usurping corporate opportunities when they accepted thousands of initial public offering shares at the initial offering price from eBay's investment banker, Goldman Sachs ROL: Where a corporation regularly and consistently invests in marketable securities, a claim for usurpation is stated where it is alleged the corporation's officers and directors accepted the IP share allocations at the initial offering price instead of having those shares allocated to the corporation.ROL: A claim of aiding and abetting a breach of fiduciary duty is stated where it is alleged that an investment banker has allocated lucrative IPO shares to a corporations insiders knowing(1) that the insider owed a fiduciary duty to the corporation not to profit personally at the corporations expense i. e. created a conflict of interest; (2) the corporation regularly invested in marketable securities, i. e. , in the line of business; and (3) the company was financially able to take advantage of the opportunity E. Dominant Shareholders Sinclair Oil Corp. v. Levien Facts: Plaintiff, Francis Levien, brought suit as a minority shareholder of Sinclair Venezuelan Oil Company (†Sinven†) which was a subsidiary of Defendant, Sinclair Oil Corporation. Plaintiff alleged that Defendant caused Sinven to pay out excessive dividends, and that Defend ant breached their contract with Sinven.CB ROL: A standard of intrinsic fairness will be applied in any self-dealing transaction by a parent corporation whose majority ownership places a fiduciary duty upon the parent corporation, but the transaction only be self-dealing if the transaction is to the detriment of minority shareholders. Self Dealing: transaction in which a fiduciary uses property of another, held by virtue of the confidential relationship, for personal gain. Shareholders do not have a fiduciary duty to one another 3 Cause of Action Arguments (1) Excessive dividends (Self-Dealing): No self dealing because each shareholder received a proportionate share of divided payment (2) Usurpation of corporate opportunities: No opportunities presented to Siven independently and which Sinclair either took for itself or denied to Sinven.OK to use different subsidiaries in other countries for different business opportunities-apply BJR (3) Breach of contract: self-dealing involved and Sinclair required to account to Sinven Intrinsic Fairness Test (IFT) ROL: IFT should not be applied to business transactions where a fiduciary duty exist but is unaccompanied by self dealing IFT is a defense to a claim that a director engaged in an interested transaction by showing the transaction's fairness to the corporation when the situation involves a parent and subsidiary, with the parent controlling the transaction and fixing the terms, the test of intrinsic fairness, with its resulting shifting of burden of proof, is applied.The basic situation for the application of the rule is the one in which the parent has received a benefit to the exclusion and at the expense of the subsidiary if such a dividend is in essence self-dealing by the parent, then intrinsic fairness standard is the proper standard for example, suppose a parent dominates a subsidiary and its board of directors. The subsidiary has two classes of stock, X and Y. Class X is owned by the parent and Class Y is own ed by minority stockholders of the subsidiary. If the subsidiary, at the direction of the parent, declares a dividend on its Class X stock only, this might well be self-dealing by the parent. If would be receiving something from the subsidiary to the exclusion of and detrimental to its minority stockholders.This self-dealing, coupled with the parent's fiduciary duty, would make intrinsic fairness the proper standard by which to evaluate the dividend payment Dominant Shareholder Some fiduciary duties imposed (1) controlling shareholders can control the board. It is possible to control the board with less than 50% ownership (2) Some corporate actions require the shareholder vote and if the shareholder uses the vote in an unfair manner, the court will hold the shareholder liable. Intrinsic Fairness Test is triggered when one party is on both side of the transaction. The controlling shareholder has the burden of proving that transaction was fair to the corporation F. Ratification Fleigl er v. LawerenceFacts: Plaintiff, Irving Fliegler, brought a suit on behalf of Agau Mines, Inc. , against Defendant directors, John Lawrence et al. , after they voted to exercise an option to purchase shares of another company. CB ROL: Shareholder ratification of a transaction between the corporation and an interested party will not be legitimate if the majority of the shareholders are the interested parties. G. Disclosure and Fairness H. Delaware General Corporation Law Section 144 Rule 10b-5 (a) unlawful to defend or make untrue statements in connection with purchase or sale of securities-Look for deception or manipulation (i) disclosures must be honest (ii) allows for a private cause of action iii) companies are required to speak to tell things to the market and when they disclose it must be honest (iv) if a company discloses information to the market, whether required to disclose or not, must make an honest disclosure (v) typically, companies refrain from disclosing unless requi red by the SEC or required by market forces. Basic Inc. B Levinson Facts: Respondents, Max Levinson et al. , held shares in Petitioner Corporation, Basic Inc. Respondents brought this action after 3 misleading statements concerning a potential merger induced them to sell their shares at a depressed price. CB ROL: Misleading statements during merger discussions will be material under Rule 10b-5 if the misstatements would have changed the view of the total information by a reasonable investor.ROL: whether a company's state is material, in the context of merger discussions, requires a case-by-case analysis of the probability that transaction will be consummated and the significance of the transaction to the issuers of the securities ROL: an investor's reliance on material, public, misrepresentations may be presumed under the fraud-on-the-market theory for purposes of a Rule 10b-5 action Materiality importance-the degree of relevance or necessity to the particular matter, a fact based i nquiry (1) to fulfill the materiality requirement there must be a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the â€Å"total† mix of information available. Does the statement made by the company change the total mix of the information available? 2) materiality depends on the significance the reasonable investor would place on the withheld or misrepresented information (3) As the probability of the event increases, it becomes more and more material and increases the need to disclose (4) As the magnitude of the event increases, it becomes more and more material and increases the need to disclose (5) Probability x Magnitude = Materiality SEC Securities and exchange commission encourages transparency through disclosure of information that is material Fraud on Market (FOM) FOM the price of a company's stock is determined by the available information regarding the company and its b usiness. Misleading statements will therefore defraud purchasers of stock even if the purchasers do not directly rely on the misstatements. The market must be able to recognize the information and reflect the information in an adjustment in the price of stock Dissent in Basic he court should not endorse the fraud on market theory for 3 reasons: (1) common law doctrine of fraud and deceit; (2) the court presumption of reliance also assumes that buyers and sellers rely not just on the market price, but on the integrity of that price; and (3) many investors purchase or sell stock because they believe the price inaccurately reflects the corporations worth. Therefore, Efficient Market Theory (EMT) in a deep and liquid market, The market takes into account all available information and no one has any additional, valuable information if that's true, over the long term you can't beat the market because the market will always have more information than an individual over time. Therefore, for Rule 10b-5 action the court presumption is that the shareholder relied on the price of the stock. now the burden of proof is on the defendants to prove that the shareholders actions were not in reliance on the price of the stock but some other reason. RelianceReliance provides the requisite causal connection between the defendants misrepresentation and a plaintiff's injury we previously dispensed with a requirement of positive proof of reliance, where a duty to disclose material information had been breached, concluding that the necessary nexus between the plaintiff's injury and the defendant's wrongful conduct had been established Reliance of individuals on the integrity of the market price may be presume; however, that presumption can be rebutted Misc because most publically available information is reflected in the market price, an investor's reliance on any public material misrepresentation. The court adopted the TSC Industries standard of materiality for 10b5, which concludes that an omitted fact is material if there is a substantial likelihood that reasonable shareholder would consider it important in deciding how to vote. (a) further to fulfill the materiality requirement, there must be a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the total mix of information made available. b) there must be reliance on the statement or omission. (1) there is more than one way to demonstrate the casual connection between the misrepresentation and the plaintiff's injury–no requirement of positive proof of reliance, (2) the class action is extremely important because it allows the plaintiffs to secure counsel to pursue claims that otherwise would be cost prohibitive; (3) The court held that there is a presumption of reliance. Agreement in Principle Test Preliminary merger discussions do not become material until agreement in principle as to the price and structure of the transaction have been reached between the would be merger partners. rationales are offered in support of this (1) an investor should not be overwhelmed by excessively detailed and trivial information and focuses on the substantial risk that preliminary merger discussions may collapse (2) it helps to preserve the confidentiality of merger discussions where earlier disclosure might prejudice the negotiations. (3) the test also provides a usable, bright line rule for determining when disclosures must be made. In Basic, the shareholders sold stock based on their reliance on the integrity of the price set by the market, but because of Basic's material misrepresentation that market prices had been frequently depressed Probability/Magnitude Approach ateriality will depend at any given time upon a balancing of both the indicated probability that the event will occur and the anticipated magnitude that the event will occur and the anticipated magnitude of the event in light of the tot ality of the company activity (1) to assess the probability, a fact finder will need to look to indicia of interest in the transaction at the highest corporate levels–board resolutions, instructions to investment bankers, and actual negotiations between principals or their intermediaries may serve as indicia of interest (2) to assess magnitude of the transaction to the issuer, a fact finder will need to consider such facts as (a) the size of the two corporate entities and (b) the potential premiums over market value Why allow private individuals to press claims? allows people with a real stake in the claim to pursue it encourages reaching the larger statutory goal of disclosure by having mini-private-attorney generals–basically a multiplier for the SEC West v. Prudential Securities, Inc. Facts: Plaintiffs, Dean West et al. brought an action under the fraud-on-the-market doctrine after a stockbroker for Defendant, Prudential Securities, Inc. , gave then non-public tips that were fraudulent. CB ROL: A fraudulent statement needs to be made publicly accessible in order for a plaintiff to claim that the statement caused a loss on the investment. ROL: Unless the information reaches the market, there can be no fraud on the market to satisfy the reliance factor Santa Fe Industries, Inc. v. Green Facts: Plaintiffs, Green et al. , were minority shareholders of Kirby Lumber Corp. Plaintiffs brought this action to recover a greater share price after Defendant majority shareholder, Santa Fe Industries, Inc. , forced Plaintiffs to sell their shares.CB ROL: Section 10(b) of the Securities Exchange Act and Rule 10b-5 prohibit conduct involving manipulation or deception, but are not so expansive as to govern incidences of fiduciary breach. ROL: before a claim of fraud or breach of fiduciary duty may be maintained under 10b-5, there must first be showing of manipulation and deception Manipulation and Deception inadequate compensation does not rise to level of mani pulation or deception when all facts are disclosed No manipulation or deception; therefore, the shareholders filed the wrong cause of action and should have sought an appraisal remedy In addition, state law generally governs the internal affairs of a corporation, such as fiduciary responsibility Remember Rule 10b-5 is a federal cause of actionThe Court granted which relief that could be granted (a) federal law was asserted violated because the merger was undertaken without prior notice (b) the low valuation placed on the shares in the cash exchange offer was itself said to be fraud that is actionable under 10b-5 (c) the purpose of getting rid of the minority shareholder helps to eliminate the fiduciary duty and also if you can buy the minority shareholders out at a lower price, there's more money to be made (d) 10b-5 cause of action is based on market manipulation and there can also be a 10b-5 action when there is no sufficient disclosure, but not for insufficient compensation 10b-5 reach for minority shareholder squeeze out 0b-5 reaches breaches of fiduciary duty by a majority shareholder against a minority shareholder without any charge of misrepresentation or lack of disclosure Neither misrepresentation nor non-disclosure are necessary elements of rule 10b-5 starting point of every 10b-5 case involving construction of a statute is the language itself–the language gives no indication that Congress meant to prohibit any conduct not involving manipulation or deception Two factors determine whether Congress intended to create a federal cause of action: (1) language of the statute; and (2) whether the cause of action is traditionally relegated to state law. Absent a clear indication of congressional intent, the Courts are reluctant to federalize the substantial portion of the law of corporations that deals with transactions in securities, particularly where established state policies of corporate regulation exist. 2 Reasons Sante Fe is an appropriate case for an appeal 1) the district court's order marked an substantial extension of the fraud on the market approach Basic held that because most publicly available information is reflected in the market price, an investor's reliance on any public material misrepresentation-that public information trades quickly and influences securities prices (2) Few securities transactions are litigated to conclusion, so a review of this novel and important legal issue may be possible only through the Rule 23(f) device (a)it is hard to see how Hofman's non public statements could have caused changes in the price of Jefferson's Savings stock -found the fraud on the market doctrine on a causal mechanism with both theoretical and empirical power, for non public information there is nothing comparable (b) there is non public information and securities prices, let alone show that the link is as strong as the one deemed sufficient (c) Blue Chip Stamps court held plaintiff had no cause of action under 10b-5 because it had neither bought or sold shares, plaintiff argued because the corporation negatively painted their position, it exercised the right not to purchase share on which they would have made a profit. (d) Ernst v.Ernst court held that liability for issuance of a false or misleading statement requires proof of a state of mind referred to scienter, court also held recklessness would be sufficent (e) Central Bank court held that there was not implied private right of action against those who aid and abet violation of Rule 10b-5 I. Inside Information Securities and Exchange Commission v. Texas Gulf Sulfur Co. Facts: Plaintiff, the Securities and Exchange Commission, brought this suit against Defendants, Texas Gulf Sulphur Co. , et al. , after Defendants bought shares of Texas Gulf while they secretly had positive information regarding mining activities carried out by the company.CB ROL: Insiders cannot act on material information (information that a reasonable man would deem impo rtant to the value of the stock) until the information is reasonably, publicly disseminated. ROL: it is unlawful to trade on material inside information until such information has been disclosed to the public and has had time to become equally available to all investors ROL: A company press release is considered to have been issued in connection with the purchase or sale of a security for purposes of imposing liability under the federal securities laws, and liability will flow if a reasonable investor, in the exercise of due care, would have been misled by it. The essence of Rule 10b-5 is that anyone, would have been misled by it.In the securities if a corporation has access, directly or indirectly, to information intended to be available only for a corporate purpose and not for the personal benefit of anyone may not take advantage of such information knowing it is unavailable to those whom he is dealing Rule of Disclosure or Abstention Anyone in possession of material inside inform ation must either disclose it to the investing public, or if he disabled from disclosing it in order to protect a corporate confidence, or he chooses not to do so, must abstain from trading or recommending the securities concerned while such inside information remains undisclosed. Becomes a Rule of Abstention insider must either disclose or abstain. in this instance the company prohibited the insider from disclosing the information..Thus even if the insider quit the company and sought to disclose, the insider's fiduciary obligation to the company prohibits the insider from disclosing the information (i) because the information is private information of the company, it ultimately results in requiring the insider to abstain from trading (ii) insiders must refrain from trading until the market digests the information Materiality Test the basic test of materiality is whether a reasonable man would attach importance in determining his choice of action in the transaction in question. (i) this encompasses any fact which in reasonable and objective contemplation might affect the value of the corporation's stock or securities. ii) thus, material facts include not only information disclosing the earnings and distribution of a company, but also those facts which affect the probable future of the company and those which may affect the desire of the investors to buy, sell, or hold the company's securities Required Disclosures 10Q – quarterly earnings 10k – annual earnings 8k – material events that occur between reporting periods. Insider Information anyone in possession of material inside information must either disclose it to the investing public or if he is prevented from disclosing to protect corporate confidence, or he chooses not to do so, must abstain from trading in or recommending the securities concerned while such inside information remains undisclosed. a) the insider's duty to disclose information or his duty to abstain from dealing in his c ompany's securities arise only in situation which are essentially extraordinary in nature and which are reasonably certain to have a substantial effect on the market price of the security if the extraordinary situation is disclosed (b)the test of materiality is whether a reasonable would attach importance in determining this choice of action in the transaction in question (c) corporations are only required to disclose that information that is required to be disclosed–there is a duty to disclose every annually, quarterly, and between quarters those events and activities that are extraordinary information (d) a survey of the facts establish that knowledge of the results of the discovery hole K 55 1 would have been important to a reasonable investor and might affect the price of stock (e) a major factor in determining discovery was material is the importance attached to the drilling result by those who knew about it (1) once the information is disclosed, the market will adjust ( 2) the insider traders can start trading as soon as the market can digest the information (in modern society that's quickly) Holding: All transactions in TSG stock or calls by individuals apprised by the drilling results were made in violation of Rule 10b-5 V. Problems of Control (Chapter 6) A. Proxy Fights Proxy is the right to vote someone else's shares Proxies are need to establish quorums (50%+1), which are typically required for an election to count The outcome of voting will depend on which group has collected the most proxies: Under corporate law, shareholders may appoint an agent to attend the meeting and vote on their behalf and hareholder proxy holder Incumbent managers of large firms solicit proxies from shareholders directly Both Tender offers and proxy fights are subject both to the 1934 Securities Exchange Act and to state corporate statutes SEC – Federal Rules Require Certain Disclosures when Soliciting Proxies Proxy statement must be given– statement mu st disclose material information Proxy battles is a way to change the way a firm is manage Proxy Contest proxy contest is a struggle between two corporate factions to obtain the votes of uncommitted shareholders. A proxy contest occurs when a group of dissident shareholders mounts a battle against corporations managers 1.Strategic Use of Prox

The Ultimate Guide to Commonwealth Scholarship Essay Samples

The Ultimate Guide to Commonwealth Scholarship Essay Samples If you encounter a task you maynot handle all on your own, don't be scared to request assistance. Even if you're only a couple of minutes late for work, an important task might not be completed punctually. As you most likely know, an outline is an excellent starting point for virtually any sort of written work. Luckily, you've come to the perfect place to discover the greatest remedy to every single academic writing problem that you're currently facing with your essay. Scholarship essay isn't a paper at which you can forgive yourself misspellings or formatting inaccuracy. Anyway, should you need help with a nursing essay, don't forget that you aren't alone. Nursing essay examples will be able to help you to understand how to compose a very good thesis statement. The cost of an essay depends upon the quantity of effort the writer has to exert. Freelance essay writer You are able to look for freelance essay writers on the internet also. The reader must comprehend the writer's topic within the first couple of sentences. Don't use any fancy fonts as it can produce the essay appear informal. A superb essay is one which leaves an enduring impression. An essay outline will allow you to organize the general structure of your essay. So, naturally, you will want to understand the principles of writing a winning essay. The Basic Principles of Commonwealth Scholarship Essay Samples That You Will be Able to Learn From Starting Right Away You have to be aware of such facts and numerical data also. The application has to be full of all your own personal information. You are able to claim totally free unlimited revisions or a refund in the event you dislike the completed paper. The total format of your essay, for example, font size and margins, will solely count on the instructions offered to you. To purchase essay online, you simply will need to fill in the application form and you'll get excellent work on the desired topic. That means you can order for our high school scholarship essay examples withou t needing to fret about your private information. Outstanding papers on any topic that is connected to either theory or practice of nursing is going to be delivered within the designated time. Being part of a decent educational institution can be very costly. It's evident that most students find it difficult to submit absolutely free error sample essay for financial need scholarship since mostly they give plagiarized content since they copy the precise information found on the web. Thus, the student should produce the argument compelling. Therefore, many students and employees decide to get low-cost essay rather than writing it themselves. Top Commonwealth Scholarship Essay Samples Secrets Therefore, among the most important things you need to do when getting prepared to compose your college scholarship essays is to devote some time reflecting on precisely how wonderful you truly are. Let's grab the wonderful chance of hiring intelligent writers for individual statement creation. For people who don't understand which type of scholarship to apply for, I would need to recommend taking a peek at the scholarship page of the school's website. To be effective in the nursing profession, there are various regions of strength which you will want to possess. Not everybody can afford superior education, and that's why some folks decide to join the institution's scholarship program. Inspiring other students to look for knowledge kindles my own search to understand the world and the folks around me. Except for the Chevening Scholarship which permits you to begin the application before getting an admission, the bulk of scholarships need you to experience an admission before applying. Our nursing scholarship essay examples can increase the odds of your admission to a nursing program. A scholarship essayis part of ascholarship application. Many scholarships are provided to very specific groups or kinds of students, so be sure you fit within that group.

The Great Gatsby Themes Wealth, Class, Love, Idealism

The Great Gatsby, by F. Scott Fitzgerald, presents a critical portrait of the American dream through its portrayal of the 1920s New York elite. By exploring themes of wealth, class, love and idealism, The Great Gatsby raises powerful questions about American ideas and society. Wealth, Class, and Society The Great Gatsbys characters represent the wealthiest members of 1920s New York society. Despite their money, however, they are not portrayed as particularly aspirational. Instead, the rich characters negative qualities are put on display: wastefulness, hedonism, and carelessness. The novel also suggests that wealth is not equivalent to social class. Tom Buchanan comes from the old money elite, while Jay Gatsby is a self-made millionaire. Gatsby, self-conscious about his new money social status, throws unbelievably lavish parties in hopes of catching Daisy Buchanans attention. However, at the novels conclusion, Daisy chooses to stay with Tom despite the fact that she genuinely loves Gatsby; her reasoning is that she could not bear to lose the social status that her marriage to Tom affords her. With this conclusion, Fitzgerald suggests that wealth alone does not guarantee entrance into the upper echelons of elite society. Love and Romance In The Great Gatsby, love is intrinsically tied to class. As a young military officer, Gatsby fell quickly for debutante Daisy, who promised to wait for him after the war. However, any chance at a real relationship was precluded by Gatsbys lower social status. Instead of waiting for Gatsby, Daisy married Tom Buchanan, an old-money East Coast elite. It is an unhappy marriage of convenience: Tom has affairs and seems just as romantically uninterested in Daisy as she is in him. The idea of unhappy marriages of convenience isn’t limited to the upper class. Tom’s mistress, Myrtle Wilson, is a spirited woman in a seriously mismatched marriage to a suspicious, dull man. The novel suggests that she married him in hopes of being upwardly mobile, but instead the marriage is simply miserable, and Myrtle herself ends up dead. Indeed, the only unhappy couple to survive unscathed is Daisy and Tom, who eventually decide to retreat into the cocoon of wealth despite their marital problems. In general, the novel takes a fairly cynical view of love. Even the central romance between Daisy and Gatsby is less a true love story and more a depiction of Gatsbys obsessive desire to relive—or even redo—his own past. He loves the image of Daisy more than the woman in front of him. Romantic love is not a powerful force in the world of The Great Gatsby. The Loss of Idealism Jay Gatsby is perhaps one of the most idealistic characters in literature. Nothing can deter him from his belief in the possibility of dreams and romance. In fact, his entire pursuit of wealth and influence is carried out in hopes of making his dreams come true. However, Gatsbys single-minded pursuit of those dreams—particularly his pursuit of the idealized Daisy—is the quality that ultimately destroys him. After Gatsbys death, his funeral is attended by just three guests; the cynical real world moves on as though hed never lived at all. Nick Carraway also represents the failures of idealism through his journey from naà ¯ve Everyman observer to burgeoning cynic. At first, Nick buys into the plan reunite Daisy and Gatsby, as he believes in the power of love to conquer class differences. The more involved he becomes in the social world of Gatsby and the Buchanans, however, the more his idealism falters. He begins to see the elite social circle as careless and hurtful. By the end of the novel, when he finds out the role Tom cheerfully played in Gatsby’s death, he loses any remaining trace of idealization of elite society. The Failure of the American Dream The American dream posits that anyone, no matter their origins, can work hard and achieve upward mobility in the United States.The Great Gatsby questions this idea through the rise and fall of Jay Gatsby. From the outside, Gatsby appears to be proof of the American dream: he is a man of humble origins who accumulated vast wealth. However, Gatsby is miserable. His life is devoid of meaningful connection. And because of his humble background, he remains an outsider in the eyes of elite society. Monetary gain is possible, Fitzgerald suggests, but class mobility is not so simple, and wealth accumulation does not guarantee a good life. Fitzgerald specifically critiques the American dream within the context of the Roaring Twenties, a time when growing affluence and changing morals led to a culture of materialism. Consequently, the characters of The Great Gatsby equate the American dream with material goods, despite the fact that the original idea did not have such an explicitly materialistic intent. The novel suggests that rampant consumerism and the desire to consume has corroded the American social landscape and corrupted one of the countrys foundational ideas.